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DEFAULT RISK: The probability that a borrowing agent will not pay in full the agreed interest and/or principal. A default risk can be assigned to any bond or loan agreement. Of course, there are some instruments considered default-risk-free, that is, instruments for which the probability that a borrowing agent will not pay is zero. The most noted examples are the U.S. Treasury securities, which have virtually no default risk because the U.S. government guarantees that all the principal and interest will be repaid. When calculating the risk premium on financial instruments, investors use default-risk-free instruments for comparison.
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MARGINAL UTILITY OF INCOME The change in utility resulting from a given change in income. This is a specialized case of the general notion of marginal utility, which is simply the change in utility resulting from a given change in the consumption of a good. Marginal utility of income is key to identifying alternative risk preferences, including risk aversion, risk neutrality, and risk loving. These three risk preferences are indicated by three marginal utility of income possibilities, decreasing (risk aversion), increasing (risk loving), and constant (risk neutrality).
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YELLOW CHIPPEROON
[What's This?]
Today, you are likely to spend a great deal of time visiting every yard sale in a 30-mile radius seeking to buy either a handcrafted bird house or a weathervane with a chicken on top. Be on the lookout for small children selling products door-to-door.
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This isn't me! What am I?
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A communal society, a prime component of Karl Marx's communist philosophy, was advocated by the Greek philosophy Plato.
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"I feel sorry for the person who canžt get genuinely excited about his work. Not only will he never be satisfied, but he will never achieve anything worthwhile. " -- Walter Chrysler, automaker
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ISMA
International Securities Market Association
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